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Exam 5: How to Form a Business

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Question 131

Multiple Choice

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Finley is a limited partner in Gettout & Associates.Heywood U.Gettout,one of the general partners in the company,must temporarily leave the company to attend to some personal matters.Heywood has asked Finley to perform his managerial duties while he is gone.As a limited partner,Finley:

A) Can fill in as a manager whenever necessary,as long as it is for only a limited time.
B) Can make managerial decisions as long as they do not involve the payment of money.
C) Cannot participate in the management of the partnership.
D) Can manage the firm as long as he gets approval from the company's other general partners.

E) B) and C)
F) A) and C)

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Question 132

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According to the Uniform Partnership Act,the three key elements of any general partnership are 1)shares of stock to represent ownership,2)limited liability,and 3)ease of ownership transfer.

A) True
B) False

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Question 133

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A company that loses its status as an S corporation may not reelect this status for at least 5 years.

In a leveraged buyout,the managers of a firm,its employees,or other investors:

A significant disadvantage of owning a sole proprietorship is the:

A merger is a mutual agreement where a firm joins together with another firm,whereas an acquisition is when one firm purchases the assets and obligations of another firm.

What is the difference between a general partner and a limited partner? Give an example of a situation in which a person would want to be a limited partner.

Which of the following is an advantage of franchises?

Opening and operating a franchise in a different country:

About 15 years ago,a well-known franchised food chain was brought to its knees when several customers got sick from tainted beef.Although the food chain recovered due to its quick and consistent action,several franchisees sued the parent company for loss of sales.The franchisees experienced the coattail effects of the bad publicity this event received.

The __________ is the most common form of business ownership.

Marco is a franchisee with Daggies,a chain of sandwich shops.His business was doing well until several Daggies franchisees got in trouble and were forced to close their shops.Soon afterward,Marco's business deteriorated and he too was forced to close.This is an example of:

When two companies in completely unrelated industries agree to become one firm,the result is called a:

According to the Legal Briefcase box," Virtual Companies",a Vermont virtual LLC's profits are distributed to members according to their contribution of time,expertise,and money.

An owner of a corporation is known as an) :

The fairest way to handle profits in any partnership arrangement is to divide things evenly.If there are two owners in the business,each gets 50%.If there are three owners even if one is a limited partner),each gets 33.333% of any accumulated profits.

Dane is a stockholder in SmallWorld,Inc. ,a C-corporation that manufactures amusement park rides.The company recently lost a major court decision and will probably be forced into bankruptcy.In fact,the damages awarded are so great that,even if all company assets are sold and the proceeds are used to pay its debts,SmallWorld is likely to still owe money to its creditors.If SmallWorld go bankrupt,Dane and the other stockholders will:

The owners of a corporation are known as general corporate partners.

By filling out the correct paperwork annually,any corporation can qualify to be classified as an S corporation.

Franchising has certainly become a key component of the U.S.economy.What are the major advantages and disadvantages of franchising?